Aequs Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Operational turnaround underway, headline distorted: Operational EBITDA jumped 3.5x QoQ to ₹14.8 crore as consumer losses narrowed, but reported EBITDA fell because Q4 included a one-off forex gain. The underlying execution is tracking management's plan.
• Aerospace order book crosses a milestone: The order book surpassed USD 100 crore, up 13% QoQ, and does not yet include the new Farnborough Airshow wins or the landmark Safran A320 wheels contract.
• Consumer is scaling fast but still loss-making: Revenue nearly tripled YoY and now makes up 19% of the top line, with utilization expected to reach 40–50% by Q4 FY27, the point at which management targets segment EBITDA breakeven.
• The Safran wheels win is a strategic leap, not just a contract: A 15-year, single-source agreement for a fully integrated, flight-critical product that the customer has never outsourced before, validating the ecosystem model. Management calls it a "much larger margin opportunity" but declined to quantify it.
• What to watch next quarter: Whether the Farnborough wins and the Safran contract enter the order book and drive the promised sequential acceleration, and whether consumer utilization continues its climb toward the breakeven threshold.

The Operational Story Beneath the Headlines

• Reported vs operational EBITDA: Reported EBITDA of ₹21.5 crore was lower than Q4 FY26 solely because other income (forex) was unusually high in Q4. Excluding other income, operational EBITDA improved 3.5x sequentially from ₹4.2 crore to ₹14.8 crore, driven by narrowing consumer loss.
• Consumer loss narrowed meaningfully: Consumer segment EBITDA loss shrank by ₹11.2 crore, or ~24% sequentially, supported by increasing production volumes and improving operating performance. The YoY comparison is distorted because consumer electronics operating costs were capitalized in Q1 FY26 and only began flowing through the P&L from Q4 FY26.
• PAT loss improved on a comparable basis: PAT loss moved from an adjusted ₹63.1 crore in Q4 FY26 (excluding a ₹9 crore exceptional gain) to ₹53.2 crore in Q1 FY27.
• Finance costs halved: Finance cost dropped from ₹35.8 crore to ₹18.9 crore sequentially following debt reduction, including ~₹252.7 crore in loan repayments and a ₹78.9 crore net reduction in short-term borrowings in the prior quarter.
• Working capital and cash flow: Net working capital days improved from 127 to 125 days, reflecting better conversion of higher operating scale into cash. Cash flow from operations was negative ₹41.4 crore, primarily reflecting additional working capital to support the higher operating cycle.

Aravind Melligeri: "On the operational basis, excluding the other income, EBITDA improved from 4.2 crore in Q4 to 14.8 crore, a more than three-fold sequential improvement, driven by narrowing consumer loss. That operational trajectory, not the currency line, is the measure of execution and it's moving exactly as we committed."

Aerospace: Order Book Momentum and a Landmark Win

• Revenue growth outpaced guidance: Aerospace revenue grew 40% YoY, above the 25–30% full-year target, supported by higher customer build rates and the progression of additional parts into production. 86 new parts were added, expanding the portfolio to 5,740 parts.
• Order book crossed USD 100 crore: The order book reached this milestone with a 13% sequential increase from USD 88.9 crore, validating OEM trust and program portfolio depth. The new Farnborough Airshow wins and the Safran wheels contract are not yet reflected and are expected to be reflected in the next quarter's order book.
• Farnborough Airshow wins: Long-term agreements were signed with two new aerostructure Tier-1 customers, expanding the global base. These are expected to enter the order book next quarter.
• Safran Landing Systems contract: Aequs won its first contract for fully integrated Airbus A320 wheels, delivering completely assembled wheels built from India-sourced aerospace-qualified aluminum. The scope spans forging, machining, surface treatment, and assembly, all within the Belagavi Aerospace ecosystem, described as 100% Make in India for a flight-critical product.
• Safran contract is unprecedented: The 15-year agreement is the longest in Aequs history and marks the first time the customer has moved this capability outside its own facilities. It is a single-source order for Aequs. Management stated it is a "much larger margin opportunity" but declined to quantify the contract value or specific margins.
• Capacity addition continues: The company is adding approximately one machine per week since last December, with capex continuous to support order book growth. Management is evaluating acceleration of the aerospace capex plan to ensure capacity is available in line with customer timelines given the scale of new wins.

Aravind Melligeri: "This is the first time ever the customer has moved this capability outside its own facilities, as it was previously managed in-house. Instead of investing in the capacity internally, the customer is working with us to leverage the strength of our ecosystem."

Consumer: Scaling Toward Breakeven

• Revenue nearly tripled YoY: Consumer revenue grew to 19% of the consolidated top line, up from 10% a year ago, driven by the consumer electronics ramp at Hubballi. The segment achieved 16% QoQ revenue growth while operating at similar capacity utilization as Q4, reflecting enhanced throughput, better product mix, and improved execution.
• Utilization is low but climbing: Current quarter utilization was ~22%, with a slight dip from 23% in Q4 that management attributed to better yield from existing assets, not capacity expansion. The target is 40–50% by Q4 FY27, driven by customer demand ramp-up across both toys and consumer electronics sub-verticals.
• Growth is demand-led, not inventory build: Management stated that whatever is being produced is being shipped; growth is driven by customer demand, not restocking.
• Both sub-verticals growing in tandem: Toys and consumer electronics are scaling together, with utilization improvement cutting across both businesses. Certain assets can be used commonly across both. The company is entering into additional programs beyond the scope previously assigned.
• Customer names disclosed: Consumer electronics serves one of the largest consumer electronics brands (name confidential), consumer durables serves Tramontina, and toys serves Mattel, which management says is scaling up well and continues to be a strategic customer.
• Cost structure: Other expenses and employee benefit costs doubled YoY because Q1 FY26 did not include consumer electronics P&L impact (expenses were capitalized then). Fixed costs are expected to remain largely the same in the near term, while variable costs will grow slightly with revenue.

Rajeev Kaul: "The consumer segment achieved 16% quarter-on-quarter revenue growth ... while operating at a similar capacity utilization level as Q4. So that demonstrates how we are utilizing our capacity for our business. This reflects basically through the enhanced throughput, better product mix and improved execution."

Expansion: Hosur and the Next Phase

• Hosur ecosystem represents the next growth leg: The proposed integrated facility in Hosur will focus on engine and landing gear components, with an end-to-end model similar to Belagavi but with a predominant aerostructure focus. Total investment is ₹1,900 crores over 10 years including JVs.
• Phased rollout: The first facility (machining) is expected to commence between September FY27 and March FY28, with forging and other vertical integration to follow. All vertical integration investment is to be completed by the 2030 timeframe. Revenues are expected to kick off from FY29.
• Five-year capex plan: Total capex of about USD 35 crore to USD 40 crore from FY27 to FY31. FY27 capex is ₹660 crores, with an original split of ₹500 crores for consumer and ₹160 crores for aerospace. Management noted aerospace capex may accelerate, compensated by reduction or optimization in consumer. If consumer utilization ramp-up does not happen, some portion of consumer capex will not occur.
• Raw material ecosystem remains a long-term challenge: 99% of raw material is imported, with only 1–2 alloys qualified domestically so far. Management acknowledged this is "a long journey" but expressed hope that recent vertically integrated wins could accelerate domestic qualification.

Aravind Melligeri: "It's a long journey to develop this ecosystem globally & nationally. It's a journey, that's what I call. Hope we can accelerate some of these things with some of the wins what we have had & kind of wins we have had, more of those vertically integrated."

Tariffs, Trade, and the Demand Environment

• No tariff impact observed: Management stated that no specific changes have been observed due to tariffs. Customer strategies on global supply chain and supplier allocations remain unchanged for both aerospace and consumer.
• Customers taking a strategic view: Aerospace customers are committing to supplier allocations based on a strategic view of their global supply chain, and nothing has changed. The consumer side is similarly stable.

Aravind Melligeri: "Our customers have taken strategic view of where they want to be as a global supply chain and based on that they are committing the supplier allocations and we are working with them on those activities. ... Aerospace nothing has changed, even consumer side we are very clear that whatever is there nothing has changed. Very stable as far as we are concerned."

People, Talent, and the Operating Model

• Talent development is core to the model: Management emphasized an inherent ability to train and deploy people from scratch, describing it as "the fundamental DNA of the organization." The company sees no constraint on talent availability to support its growth plans.
• CFO transition underway: Dinesh Iyer stepped down at the end of June. Harish Bang is leading the finance function in the interim, and the search for a full-time CFO is progressing.

Aravind Melligeri: "We have inherent ability to train the people, deploy the people. There has never been a constraint to us. ... this is inherent, you know, the fundamental DNA of the organization to develop people from scratch, fresh out of school. That's what we have done and we will continue to do that."

Guidance & Commitments

Key Metrics